Imagine a macro investment demand curve that shows that,if the market interest rate is 4 percent,the quantity of investment demanded is $500 billion.Then,if the market rate rises to 5 percent,the most likely result is that the quantity of investment demanded
A)does not change
B)rises to $550 billion
C)declines to $450 billion
D)rises to $1 trillion
E)It is not possible to answer without seeing the actual curve

Question

Quizplus · Accepted Answer

As the market interest rate rises from 4 percent to 5 percent, the quantity of investment demanded is likely to decline to $450 billion based on the macro investment demand curve. This is because at higher interest rates, the cost of borrowing increases and the returns on investment become less attractive, thereby reducing the incentive for firms to invest.

Imagine a Macro Investment Demand Curve That Shows That,if the Market